Arguably the most important data next week is the flash PMI.   It is not available for all countries, but for those generally large G10 economies, the preliminary estimate is often sufficiently close to the final reading to steal its thunder. Moreover, and this applies to high-frequency data more broadly, given the overshoot of inflation in most counties, with some exceptions, notably in Asia, central banks appear to be on set courses.  The near-term data are interesting if you are into that kind of thing, but the Federal Reserve and the Bank of Canada seem committed to bring the policy rate to neutral expeditiously.  The hawkish chord struck by the Bank of Canada has the market favoring 50 bp moves at its next two meetings.  It is difficult to see the market getting more aggressive even though March CPI (April 20) likely accelerated above 6.0% (from 5.7%).  The housing market (existing home sales and housing starts) appears to be holding up better than in the US.  However, February retail sales look weak after a strong January.   The Fed funds futures market has nearly priced in three 50 bp hikes and 3 quarter-point moves before the end of the year.  Perhaps, it is fairer to say the market is split whether there will be a third 50 bp move or whether the Fed reverts back to 25 bp moves. One way those concerned about the pro-cyclicality of the Fed's course have expressed it is to say that the central bank will continue to hike until it breaks something. The swaps market is consistent with this being around 3%.   It is reasonable to expect that the first thing to break will be the interest rate-sensitive sectors, which also follows from the fact that the market in part because of the anticipation of what the Fed will do.  The housing market is particularly interest-rate sensitive.  The average 30-year fixed-rate mortgage rose to 5% last week for the first time in more than a decade.  Mortgage applications have fallen for five weeks through April 8.  Upcoming reports are likely to show that March housing starts, permits, and existing home sales weakened.   The market expects the ECB to stop purchasing net new bonds in June and deliver the first hike in July. Expectations for the Bank of England have been dialed back.  It is expected to go slowly, raising the bank rate by 25 bp a clip for the next several meetings. The Reserve Bank of Australia is expected to begin a fairly aggressive tightening cycle after next month's election.  The cash rate futures have almost a 190 bp higher rates priced in by the end of the year.  The Reserve Bank of New Zealand has lifted its cash target rate four times since its cycle began in October.  There had been three 25 bp moves and then, last week, a 50 bp hike.  The swaps market has priced in another 170 bp before the end of the year.  The Bank of Japan and the Swiss National Bank are a different kettle of fish.  The Swiss National Bank's deposit rate remains at minus 0.75%.  Its 10-year bond yields less than 0.8%.  March CPI rose 2.2% year-over-year, and the core rate increased 1.4%.  It is standing put for the foreseeable future.  The pressure on the BOJ comes from two sources.  First, the rise in global rates has pulled the 10-year JGB yield to near the 0.25% Yield-Curve Control cap.  There is something to be said of the IMF's advice to target a shorter maturity.  Second, headline inflation in Japan has been rising, but it has been primarily because of fresh food and energy.  In March 2021, the year-over-year rate of headline CPI was -0.4%.  It is expected to have risen to 1.0% in March 2022 when it is reported at the end of next week.  A year ago, if fresh food and energy were excluded, Japan's CPI was flat.  Last month, it was expected to be at -0.8%.   Starting with the April report, the core rate is going to rise. Moreover, it will turn positive as last year's cuts in wireless services prices drop out of the 12-month comparison. As a result, real interest rates are going to fall further.   It is common for observers to argue about a race to the bottom, with everyone seeking weaker currencies.  But this is not true.  What is true is that central banks typically want the currency to be consistent with its monetary policy thrust. A stronger currency may dilute efforts to ease financial conditions, for example. Similarly, a weaker currency when financial conditions are tightening is counterproductive.   Nor do businesses always want a weaker exchange rate.  Consider Japan.  The yen has fallen to its lowest level against the dollar in 20 years.  A Reuters survey recently found that three-quarters of Japanese firms say that the yen's weakness hurts their business.  A common fear...

Summary Activity in the industrial sector of the economy broadly improved in March. More recent disruptions, such as closures of key Chinese factories and the continued conflict in Ukraine, pose near-term headwinds to U.S. manufacturing, but today's report is the latest sign of incremental improvement in supply chains. Production resilient in face of new supply disruptions Industrial production rose 0.9% in March, more than double the gain expected by the consensus, while past data for February were also revised higher to show an equivalent 0.9% gain in output. Remarkably, this improvement in production comes amid new supply disruptions during the month with fresh lockdowns at key Chinese factories and the continued war in Ukraine. The data signal incremental progress in manufacturing amid slowly improving supply as manufacturers were able to continue to chip away at backlogged orders last month. Manufacturing output rose 0.9% after a 1.2% gain in February. Production was led by a 7.8% surge in motor vehicles, reflecting some payback from the near 5% decline a month prior. Auto assemblies jumped 23% last month to 1.86 million, which marks the highest number of vehicles assembled in a single month since the start of 2021 (chart), a marked improvement in an industry that has been the poster-child of supply chain issues. Elsewhere, rising output was fairly broad-based across the manufacturing sector (chart), with 14 of the 20 major industries reporting gains. The largest decline came from primary metals production (-1.7%), but encouragingly all categories that reported a decline in March posted sizable gains a month earlier (+1% or higher). Utilities production inched modestly higher, up 0.4% in March, likely reflecting the fact that March was a bit warmer than average across most of the country. Mining output rose 1.7%, marking the sixth consecutive monthly increase and the highest gain in five months. The recent momentum here likely reflects increased drilling activity in the United States amid sanctions against Russian oil and gas. Manufacturing activity in March clearly demonstrated progress in supply, but global supply chains still remain a far cry from functioning normally. As seen in our Pressure Gauge below, which broadly tracks high-frequency measures of supply chains, there has been some improvement in the pace of activity (slower gain in order backlog, quicker delivery times and declines in prices) but levels still remain way above pre-pandemic norms. Production may again falter in the near-term amid disruptions as producers still have difficulty procuring inputs, but the past couple of months of data demonstrate notable progress. After two-years of headache for manufacturers, we take today's report as the latest positive sign for improvement in the productive sector of the economy. Download The Full Economic Indicator

- Quiet markets with bulk of global centers closed for holiday. - French and Italian final March CPI readings reinforced concern over the region's inflation outlook. Asia - China PBoC Monthly MLF Setting left the 1-year Medium-Term Lending Facility unchanged at 2.85% (not expected). - More speculation that China could cut RRR to support the real economy, cites official [in line]. - China military said to conduct drills around Taiwan aimed to target the wrong signal sent by US regarding Taiwan (Note: Several US officials are visiting Taiwan including Senator Menendez (D-NJ) and Senator Graham (R-SC). Russia/Ukraine - Russia Defense Min confirmed its flagship of Black Sea fleet, Moskva had sunk while being towed to port in stormy weather (Note: 1st Russian loss of a flagship since the Russian-Japanese war of 1904-1905). Europe - ECB policymakers saw a July rate hike as still possible after its April meeting. Consensus seemed to be growing for 25 basis point hike in Q3 as several ECB officials sought an earlier end to bond buying program. Speakers/Fixed income/FX/Commodities/Erratum Equities - Europe closed for Easter Holiday. Speakers - ECB Survey of Professional Forecasters raised its inflation outlook while cutting the growth forecast for the 2022 and 2023 period. Raised 2022 HICP (EU Harmonized CPI) from 3.0% to 6.0% and raised the 2023 HICP from 1.8% to 2.4% (**Note: ECB Mar Staff forecast is 2.1%). Survey cut 2022 GDP growth from 4.2% to 2.9% and also cut the 2023 GDP growth forecast from 2.7% to 2.3%. - ECB's Simkus (Lithuania) stated that saw no reason not to consider rate increase. - German Fin Min Lindner said to have approved €2.47B package for LNG terminal. - Poland PM Morawiecki said to back Glapinski: for a 2nd term as central bank governor. - Russia Deputy Chairman of the Federation Council Klimov said to have noted that special military operation in Ukraine would end pretty soon and would not stretch the conflict out. - BOJ said to likely lower economic growth and raise inflation forecast for FY22 at its next Quarterly Outlook (due Apr 28th). BOJ to stress its resolve to keep monetary policy ultra-loose to underpin a fragile economic recovery. - China Industry Ministry said to be sending teams to Shanghai to ensure resumption of production and work of key industrial companies. - President Biden said to nominate Michael Barr as Fed Vice Chairman for Supervision. Currencies/Fixed Income - EUR/USD hovering around 1.08 area after Thursday’s surprisingly dovish ECB decision in regards to its future policy. Dealers zeroed in on Lagarde’s comment that ECB planned to raise interest rates "some time" after the asset purchase program was expected to end in the third quarter. Pair slowly drifted higher as French and Italian final CPI data reinforced reports that ECB policymakers saw a July rate hike as still possible after its April meeting. Consensus seemed to be growing for 25 basis point hike in Q3 as several ECB officials sought an earlier end to bond buying program. - JPY currency (yen) dropped to a new two-decade low against the USD at 126.68 as robust US data and hawkish Fed comments reaffirmed the divergence in policy between Fed and BOJ. Economic data - (FR) France Mar Final CPI M/M: 1.4% v 1.4% prelim; Y/Y: 4.5% v 4.5% prelim; CPI (ex-tobacco) Index: 109.70 v 109.69e. - (FR) France Mar Final CPI EU Harmonized M/M: 1.6% v 1.6% prelim; Y/Y: 5.1% v 5.1% prelim. - (CN) Weekly Shanghai copper inventories (SHFE): 88.7K v 96.6K tons prior. - (IT) Italy Mar Final CPI M/M: 1.0% v 1.2% prelim; Y/Y: 6.5% v 6.7% prelim; CPI (ex-tobacco) Index: 109.9 v 108.8 prior. - (IT) Italy Mar Final CPI EU Harmonized M/M: 2.4% v 2.6% prelim; Y/Y: 6.8% v 7.0% prelim. - (PL) Poland Mar Final CPI M/M: 3.3% v 3.2% prelim; Y/Y: 11.0% v 10.9% prelim. - (RU) Russia Narrow Money Supply w/e Apr 8th (RUB): 14.72T v 14,89T prior. - (TR) Turkey Mar Central Gov't Budget Balance (TRY): -69.0B v +69.7B prior. - (IT) Italy Feb General Government Debt: €2.737T v €2.714T prior (record high). - (IS) Iceland Mar International Reserves (ISK): 880 v 891B prior. Fixed income issuance - None seen. Looking ahead - (PE) Peru Feb Economic Activity Index (Monthly GDP) Y/Y: No est v 2.9% prior. - (PE) Peru Mar Unemployment Rate: No est v 8.9% prior. - 07:00 (IL) Israel Mar CPI M/M: 0.8%e v 0.7% prior; Y/Y: 3.7%e v 3.5% prior. - 07:30 (IN) India Weekly Forex Reserve w/e Apr 8th: No est v $606.5B prior. - 08:00 (RO) Romania Central Bank (NBR) Mar Minutes. - 08:30 (US) Apr Empire Manufacturing: +1.0e v -11.8 prior. - 09:15 (US) Mar Industrial Production M/M: 0.4%e v 0.5% prior; Capacity Utilization: 77.8%e v 77.6% prior; Manufacturing Production: 0.6%e v 1.2% prior. -...

While USD/JPY achieved March lows at 114.00's, USD/CAD traded 1.2400's and 1000 pips higher. Add EUR/JPY March lows at 124.00's and viewed is USD/JPY's explanation on a rampage higher to match USD/CAD and EUR/JPY. Naturally, EUR/JPY followed USD/JPY higher. EUR/JPY is a highly neutral currency pair trapped between EUR/USD and USD/JPY yet more neutral when viewed against USD/CAD in a highly close exchange rate relationship. Once EUR/JPY traded and crossed above USD/CAD around 128.00's, EUR/JPY was off the the races for 900 pips. EUR/JPY's historic position since WW2 is to forever trade above USD/JPY and competitive to USD/CAD. USD/CAD serves as the signal pair to EUR/JPY as much as NZD/USD is positioned to inform in regards to EUR/USD and GBP/USD. Exactly, 2 separate currency markets exist as EUR/USD and GBP/USD vs AUD/USD and NZD/USD. EUR/USD's 167 pips led the way yesterday as usual for EUR/USD while GBP/USD as the laggard currency to EUR/USD traded 113 pips. USD/CAD's 120 pips fairly matched EUR/JPY at 93 pips and GBP/USD in a currency market battle for superiority. NZD/USD lagged EUR/USD by a 65 pip trade day yesterday while AUD/USD managed 71 pips. USD/JPY today trades 126.47 and USD/CAD trades 1.2596 or 51 pips. The second trade signal occurred when USD/JPY traded above USD/CAD. This allowed a free long trade to EUR/JPY. USD/JPY now trades competitive to USD/CAD which means USD/JPY's rampage is done and must now trade dead ranges alongside USD/CAD as easy profits are finished. Traders must earn today's pips rather than given freely by Mr. Market. Focus now shifts to JPY cross pairs to lead the way forward for USD/JPY and USD/CAD as 137.00 EUR/JPY trades 1000 pips above USD/JPY, USD/CAD and 2800 pips above EUR/USD. GBP/JPY as the preferred short, trades 3800 pips above USD/JPY, 3900 above USD/CAD and 3400 pips above GBP/USD. To the second currency market, AUD/JPY trades 1900 pips above AUD/USD or 1/2 to GBP/JPY 3800 and NZD/JPY 1700 pips trades above NZD/USD. Historic leadership since the 2008 crash imposed by correlations experienced the 2nd side of the currency pair as positive correlations which means USD/JPY will lead JPY cross pairs lower rather than USD/CAD. While USD/CAD provides currency markets with a signal to its perfect opposite GBP/USD, USD/CAD historically lacks leadership abilities. In certain short periods when spreads between GBP/USD and USD/CAD are wide then both GBP/USD and USD/CAD share the ability to reduce spreads. But neither are leader currencies. Current spreads run 500 ish pips and fairly normal for the USD/CAD and GBP/USD relationship. Which means no big moves expected as both trade normal ranges. Major change to the currency trade lineup is instituted the 24 hour trade and the past 2 weeks of trades are viewed and posted prior and seen at btwomey.com. Yesterday 8 currency pairs traded to profit 500 ish pips. Every EUR/USD pip traded yesterday was known, seen and traded for profit.

USD/CHF skyrocketed yesterday, breaking above the 0.9375 key barrier, which had been preventing the pair from moving higher since March 18th. This, combined with the fact that there is an upside line supporting the price action taken from the low of March 31st, paints a positive short-term picture in our view. At the time of writing, the rate seems to be oscillating slightly below another key resistance zone, at around 0.9460, marked by the peak of March 16th. That zone stopped the rate from climbing higher back on April 1st, 2021, and July 16th, 2020, as well. The bulls may decide to take a break after testing that zone, or even before that happens, thereby allowing a downside correction. However, we see a decent likelihood to use the 0.9375 territory as a rebound zone this time, which could encourage them to climb above the 0.9460 obstacle. Such a break could carry larger bullish implications, perhaps paving the way towards the 0.9555 area, defined as a support by the high of June 12th, 2020. Taking a look at our short-term oscillators, we see that the RSI turned down and exited its above-70 zone, while the MACD, although above both its zero and trigger lines shows signs that it could top soon as well. Both indicators detect strong upside speed, but also hint a potential slowdown, which supports the notion for a setback before the next leg north. On the downside, we would like to see a clear dip below 0.9325, marked by the low of April 14th, before we start examining a bearish reversal. This could confirm the break below the upside line taken from the low of March 31st, and perhaps initially target the low of April 12th, at 0.9287. If the bears get encouraged to add to their positions, then a break lower could see scope for larger declines, perhaps towards the low of April 5th, at 0.9237. Slightly lower lies the 0.9195 barrier, marked by the low of March 31st, which could get tested in case the 0.9237 zone doesn’t hold.

EUR/USD The Euro maintains negative tone and probes again through key support at 1.0806, following Thursday’s 1.10% fall after dovish ECB’s stance that pushed the pair to the lowest levels since May 2020. Subsequent bounce and failure to register close below 1.0806 level after dipping to 1.0754, sidelined immediate downside risk but kept bears firmly in play. Technical studies on daily and weekly chart remain in bearish setup and support negative scenario for firm break of 1.0806 pivot that would unmask another key support at 1.0635 (Mar 2020 low). Fundamentals also work in favor of bears, as high uncertainty over the conflict in Ukraine, ECB remaining on hold while other major central banks already started to tighten its monetary policies and lack of unity between EU members in voting for a complete ban on imports of Russian energy, continues to weaken the sentiment. Brief consolidation above 1.0806 is likely to precede final push lower, with limited upticks (ideally to be capped by falling 10 DMA, currently at 1.0876) to offer better selling opportunities. Only break through 1.0820/30 resistance zone (tops of this and last week) would ease downside pressure and allow for stronger correction. Res: 1.0820; 1.0858; 1.0876; 1.0930. Sup: 1.0806; 1.0757; 1.0716; 1.0661. Interested in EUR/USD technicals? Check out the key levels